City News

Citizens on budget committee worry about payroll tax, cut impacts

For months, a group of Salem citizens read the city budget in its entirety, spent hours listening to city officials, and asked questions about vacant jobs and spending.

Ultimately, the majority of the Salem Budget Committee recommended that the Salem City Council impose a payroll tax without voter approval.

Though many supported the tax, few considered it a perfect solution. Several said in recent interviews that the timeline to evaluate hundreds of pages of information was overwhelming.

The citizen budget committee includes all eight city councilors, Mayor Chris Hoy and nine citizen volunteers, whose careers involve evaluating budgets, social and government service and banking.

Four months after the committee’s vote which led to the council’s July 10 decision to impose the tax, Salem Reporter spoke with the citizen members about their thoughts on the final form of the tax, their reactions to the city’s recent proposed cuts should the tax fail and options that they wanted the city to explore.

The committee’s role of evaluating the proposed budget for the year did not include weighing in on cuts should revenue options fail, but members said the city was transparent about the services it would likely cut.

The news organization interviewed five citizen members: Julie Curtis, Paul Tigan, Derik Milton, Andrew Cohen, Stacey Vieyra-Braendle, and received emailed responses from members Bill Dixon and Russell Allen. Roz Shirack, whose appointment expired in June, said she did not have time to comment before Salem Reporter’s deadline. Dr. Irvin Brown did not respond to emailed requests for comment.

All but Milton were originally in favor of the payroll tax that would bring in an estimated $27.9 million per year to sustain and expand the police, fire and homeless shelter services. The tax rate of 0.814% subsequently settled on by the city council would cost about $42 a month for someone making the city’s average of $29.90 an hour.

A referendum led by area business groups gathered enough signatures to put the tax before Salem voters in a special election on Nov. 7. 

Why a payroll tax?

The city calculates that its expenses are outpacing revenue, and the city is projected to be short $10.9 million of covering expenses in the next budget year. The gap would grow to $63.5 million in five years if the city operates as it does now.

No citizen on the budget committee disputed that the city needs more revenue.

“Measures 5 and 47 are having the intended effect of ensuring that resources for local governments do not keep pace with growth or need. The city of Salem has a structural imbalance in their general fund and the city either has to find an additional funding source or it will need to make significant cuts to services in the not too distant future,” Allen said in an email.

Tigan, former chair of the committee whose term expired in June, said the situation was the long-anticipated sum of years of imbalance. Tigan is on the Save Salem Campaign, which is advocating for the payroll tax. He said the budget imbalance was the first thing he was told about when he joined the committee six years ago.

“Eventually it was going to lead to significant reductions in service, and the council was able to kind of stem that tide by putting together the operations fee, and some of the funds that came into the general fund because of the pandemic” he said. “But in some ways  that just masked the problem. The writing has been on the wall for a number of years that this was coming.”

A payroll tax was recommended by the city’s revenue task force in 2018. The tax was to go before voters in 2020, but was pulled from the ballot due to the pandemic.That original recommendation was revived in this year’s budget discussions.

Cohen, who works as a budget analyst for the Oregon Health Authority, said that the city has limited options for new money. Most forms of revenue need state or federal approval, he said.

“We can do a local option levy that can be council adopted and requires a voter approval, but it sunsets after five years. So you’d have to continually do it. And the point that the city is trying to get at is that if we keep finding these stopgap measures, then we’re going to kick the can down the road until the next time we come up to this,” he said.

Milton, the sole citizen member who voted against the tax, said he didn’t want to add another expense to those in the community. Milton sat on the board for six years before his last term ended in June.

“I was bothered that we had put another tax in place. So it’s like yeah, if we have to cut in certain areas so we aren’t adding an additional tax to our citizens that are living check-to-check,” he said. “It can be a big difference from someone maybe getting their medication to even putting food on the table…. we need to find other ways to cut and we don’t need to start at the important things that we need for the city.”

Several members said the process requiring a new city budget be in place by June 30 left them feeling they couldn’t do a thorough job.The budget committee met four times in April and May before delivering its recommendations to the council.

“We get delivered these books that are literally like three inches thick of numbers and budgets. And it’s like, I mean it’s unbelievable and it’s overwhelming. And, and then in that very short period of time we are to go through all these numbers, and then we start our budget meetings. And it just – it’s so fast at times,” Milton said.

The final form of the payroll tax

Despite favoring a payroll tax, several members said they didn’t fully support the council’s level for the payroll tax, set at 0.814% tax on all wages earned in the city above minimum wage. None wanted to see deep cuts to the services Salemites use every day, like libraries and parks.

Curtis said she didn’t care for a payroll tax, but during the discussion came to understand it was one of the city’s only options.

“What I don’t support is the 0.814%, I think it’s too high,” she said, and that she wanted to look at budget cuts and keep the rate as low as possible by bringing on other revenue options.

“In order to get a whole package of everything that would be perfect for the city, staff increased that. And my feeling is, instead of increasing that, let’s continue to look internally to see what we can do and keep that payroll tax at a much lower rate,” Curtis said. 

Vieyra-Braendle, a trained occupational therapist and former city council candidate, said she did not feel the payroll tax was equitable, and wanted to see more recognition of the growing housing, child care and other expenses faced by people earning low wages.

“I think that using minimum wage isn’t a very reasonable measure in this day and age. I think realistically, that’s not necessarily going to provide a person or families a living wage,” she said.

Vieyra-Braendle said she had the impression that the committee’s vote would spur further conversation and changes by city councilors, rather than being adopted largely as-is. It being her second year on the committee, she said she was still learning the process.

Some members recognized the hardship of the tax, but said that maintaining the services made it a necessary trade-off.

“I felt that the harm such cuts would cause to the 179,000 residents of Salem would be greater than the cost the tax would impose on those who work here,” said Dixon.

Tigan said a key factor in his support for the payroll tax is that revenue from the tax would grow along with the city population.

“I don’t want to downplay or look past the part that this is going to cost people money. I mean, there’s no way around that. I think as a society, maybe we’ve gotten used to the idea, because the federal government out-spends how much it collects in taxes every year, that the money can just magically appear. Boy, is that not true at the city level,” he said.

About 80% of the city’s expenses are for paying wages, Eggleston said during a recent city council meeting.

“That part of it is something people really have to take a hard look at and understand as part of the calculation is that if the city doesn’t have the money in the bank to pay people, that’s sort of the end of the game,” Tigan said.

Cohen said that he wanted the payroll tax to sunset a lot earlier. The recommended version ultimately left the tax in place for seven years before it went to voters to renew. 

“I was trying to give the city room to balance their books, while also saying that, a lot of us felt uneasy with just ramming a tax down citizens’ throats without getting their say,” he said. “And now we are where we are, so it almost seems like déjà-vu.”

City Manager Keith Stahley said in an April email to City Councilor Micki Varney that was obtained by Salem Reporter that a four-year sunset clause would be too short to justify the expense of setting up the program. “Five to seven?” he wrote.

City spending, and the proposed cuts

On Monday, Sept. 18, city councilors discussed a list of cuts proposed by city executives if the payroll tax fails in November. That included closing the West Salem branch of the library and reducing hours at the main branch, ending city funding for homeless shelters, eliminating vacant positions in police and fire and reshuffling existing staff, and reducing upkeep at city parks. 

Read Salem Reporter’s summary of the proposals and interview with Stahley here.

The budget committee had no role in reviewing the proposed cuts.

None surprised them, though. Budget committee members said the city was clear since April about which services were likely to be cut, and that informed their decision on recommending the payroll tax.

Each shared the cut that concerned them the most, and all said they hoped there would be a way to maintain current services.

Vieyra-Braendle said her biggest concern is dropping city support of the Navigation Center, microshelters, warming shelters and Safe Park.

“If we do that, those people – our neighbors – are going to have that much more contact with the criminal justice system,” she said. “And the people most at risk are going to be our (Black, Indigenous, person of color) neighbors, people with disabilities, people with mental health challenges. And for them, it’s not just a small risk of harm. I think it’s a serious risk of harm or death.”

Tigan said the proposed cuts at the fire department were his biggest concern. By reducing staff from 43 to 40 per shift, and eventually closing two fire stations, the department estimates that 56% of 911 calls won’t be answered within five and a half minutes. It currently meets that standard about two-thirds of the time.

“The truth is, is if we make this round of cuts, in five years, we’re going to need to make some more cuts. Because the problem isn’t going away. It’s a structural problem,” he said. “So either we find a structural solution, which I think the payroll tax is, or we entertain further cuts five years from now.”

Cohen said he thinks that ultimately, Salem needs more police, not fewer, but he took issue with putting aside money for now-empty jobs at the police department. 

“Year over year, once again we’re budgeting for 20 something positions, which is quite a chunk of change, and they’re not being filled. Well then let’s eliminate them before we eliminate, you know, the library,” he said. “And when the police department can prove that they can hire and retain police officers, then yeah, we can incrementally add back more police officers to get us up to what the police chief said he needs.”

The city staff proposed that if the tax fails, the city cut the drug enforcement unit and funding for four now-vacant positions, including openings for two police officers, a sergeant and a lieutenant. 

Curtis said she thought cutting money for such vacancies was reasonable.

“I really did come to believe that the city of Salem doesn’t have a lot of fat. I think the staff is exceptional. Everybody I’ve dealt with has been really, really professional and good at their jobs,” she said. “I don’t think it’s smoke and mirrors. I think they really are lean.”

Milton has long pushed for the city to audit all budgets, which he said would help committee members like himself who don’t have an accounting background.

“I can only look at numbers and just go ‘okay, I guess this makes sense. It has to make sense because this is what they’re asking for.’ But there’s times when we bring things up where you’re like ‘this just doesn’t quite make sense, and we don’t get a lot of time to spend on these things,’” he said. 

Milton said he would have supported the payroll tax without hesitation if a full audit had been done.

“I think the city is doing what they feel is right. I don’t question that. I don’t question the integrity or the ethical side of the city of Salem. I sat on that board for (six years) and I’ve never felt any unethical behavior, but I feel that we can do a little more,” he said. “And I feel like we can do a little more to help our citizens out without having to use this payroll tax.”

Cohen said he believes the city made its case that the revenue was needed, and cuts to services were inevitable otherwise.

He pointed to the review by the consulting firm Moss Adams, which found some city functions, like human resources and IT, are understaffed, underfunded and at a lower capacity than comparable cities.

“It’s not fear mongering. I think that the CFO Josh Eggleston did a good job of saying, ‘our hands are tied with a lot of this.’ Eighty percent of the general fund budget is people, and those people are not all management, meaning that they’re union. And so when you’re union, you have a contract, and you can’t break that contract unless you’re gonna get sued,” Cohen said.

Alternative options

Committee members said they did not explore alternatives when presented with the payroll tax as the way to fix the city’s budget challenges, which was paired with an increase to the city operations fee.

Still, most had alternatives they were interested in exploring to supplement the payroll tax if it passes.

Vieyra-Braendle said that a way to split the burden between employers and employees reminiscent of Eugene’s payroll tax would have interested her.

Dixon said he hopes city staff will update the operations fee for large, commercial and industrial clients.

Cohen’s perspective was more long term, saying the city needs to invest in diversifying its economic base, and invest in small business loans, grants and the airport.

“The city is made up of people like me, government workers and teachers. We don’t have a massive university like in Eugene. We don’t have the massive businesses like they do in Portland. We’re kind of this weird conglomeration of government workers and some small mom-and-pop shops and you know, maybe government and a few other bigger things, but not really. And so our tax base just isn’t there to keep up with it,” Cohen said. 

Tigan said no other option seems as feasible as the payroll tax.

“I haven’t heard that there’s another solution coming that is going to happen at the speed at which this Salem is driving towards its fiscal cliff. Like, going to the legislature? Salem has been trying that for 30 years,” he said. 

Get involved

There are three vacancies on the Salem Budget Committee, in Wards 1, 2 and 8. To apply, see the city of Salem’s website. The term for citizen members is three years.

The Salem City Council plans another work session about proposed budget cuts in October.

The next city council meeting is scheduled for Monday, Sept. 25, at 6 p.m. It will be in-person at the city council chambers, 555 Liberty St. S.E., room 220, with the meeting also available to watch online

The public comment portion of the meeting takes place after opening exercises, such as roll call and the Pledge of Allegiance, and residents are invited to comment on any topic, whether it appears on the agenda or not. If a public comment does not relate to an agenda item, it may be saved for the end of the meeting.

To comment remotely, sign up on the city website between 8 a.m. and 2 p.m. on Monday.

For written comments, email [email protected] before 5 p.m. on Monday, or on paper to the city recorder’s office at the Civic Center, 555 Liberty St. S.E., Room 225. Include a statement indicating the comment is for the public record.

Public forum on city’s payroll tax and spending issues

Open to all

6 p.m. Wednesday, Oct. 11

Elsinore Theatre

Free tickets HERE

Correction: The article originally used the wrong pronouns for Roz Shirack, Salem Reporter regrets the error.

Contact reporter Abbey McDonald: [email protected] or 503-704-0355.

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Abbey McDonald joined the Salem Reporter in 2022. She previously worked as the business reporter at The Astorian, where she covered labor issues, health care and social services. A University of Oregon grad, she has also reported for the Malheur Enterprise, The News-Review and Willamette Week.